It is a common choice for novice business owners to run their business as a sole proprietorship. However, as your business grows, the sole proprietorship form may be too much for you. If you want to hire employees, seek investment to grow your business, or simply manage your personal responsibilities, you may want to consider switching to a company structure.
In this post, you will learn how accountants for sole trader businesses in Browns Plains help with your business.
What is a company structure?
By law, a company is considered an independent legal entity. This means that the business cannot be held personally liable for its actions. The company structure also has the advantage of continuing to exist after the owners or directors are no longer able to run the business.
Advantages of the Company Structure
According to the accountants for sole trader businesses near Browns Plains, in the normal course of events, the owner's personal assets cannot be used to pay the company’s debts, thus limiting their personal liability.
- Tax liability can be minimised because the company’s income is treated as a separate asset.
- The liability can be minimised because the company’s income is treated as a separate asset.
- The company’s profit can be divided into the company’s retained earnings after salaries are paid to management and management’s income from share dividends.
- The company’s net profit is taxed at the corporate tax rate, which is lower than the marginal tax rate for individuals.
- Profits can be retained by the company to finance future growth.
Tax liability can be minimised because the company's income is treated as a separate asset. The company's profit can be divided into the company's retained earnings after salaries are paid
A better and more legitimate brand image can be created for customers and suppliers.
It can raise significant funds for the business by raising capital from investors.
Capital Gain Events
According to the professionals offering accountants for sole trader businesses in Browns Plains, the sale of the self-employed person's business to a company is a capital gain event that generally results in a taxable capital gain for the self-employed person. In an alternative asset transfer, the capital gain from the sale of the business to the company may be deferred if the transaction is structured as follows
- The sole proprietor transfers business assets (including business liabilities) to the company in exchange for ordinary shares in the company.
- Upon completion of the transaction, the sole proprietor must own 100% of the company's ordinary shares.
Implementation and Process
- Establish the company structure.
- Draw up a business transfer agreement.
- In exchange for ordinary shares in the company, the sole trader's business assets and liabilities are transferred (sold) to the company.
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